How can you use the Boston Consulting Group (BCG) matrix to manage your product portfolio?

The BCG (Growth/Share) matrix was based on two simple principles - growth and advantage. Growth is easy to measure. Advantage is not. BCG's work with experience curves led it to use relative market share as a proxy for advantage. The idea was that companies with a higher relative market share have more cumulative experience and, therefore, should have an advantage. That logic was somewhat flawed. It confused correlation for causation. But the basic idea is still very valid. Position your future products in high-growth markets and invest to create an advantage. Harvest cash from shrinking low-growth markets and channel that cash into stars to fund growth and question marks to make new stars

The growth-share matrix is based on the premise that market leadership results in sustainable superior returns. Market leaders gain a self-reinforcing cost advantage that competitors find hard to replicate, with high growth rates indicating markets with significant growth potential.

The BCG matrix can help you know which product to double down and which one rolls back investments, abandoned or sold. It can help you which new products to introduce into the market. It helps shape long-term strategic planning.

BCG matrix is a framework to assist you to plan your new product launching into the market. Using this framework, you can decide whether your product is Stars or Cash cows or Question marks or Dogs. This method is very helpful in planning your products in the marketplace.

The BCG Matrix, developed by Boston Consulting Group, is a portfolio management tool categorizing business units or products into four quadrants: Stars (high market share, high-growth industry), Question Marks (low market share, high-growth industry), Cash Cows (high market share, low-growth industry), and Dogs (low market share, low-growth industry). It helps in strategic decision-making by balancing investments across these categories, guiding businesses on where to invest, develop, or discontinue. #BCGMatrix #StrategicPlanning #BusinessGrowth #MarketAnalysis #PortfolioManagement

Utilize the BCG Matrix by categorizing products into Stars, Question Marks, Cash Cows, and Dogs based on market growth and share. Invest resources in Stars for growth, strategize for Question Marks, extract profits from Cash Cows, and reassess or divest Dogs. Regularly review and adjust as market conditions evolve, ensuring optimal resource allocation for your product or business unit portfolio. The BCG Matrix serves as a practical guide for strategic decision-making in managing your product mix.

A company in the service sector can use the BCG Matrix to identify and prioritize its service offerings based on their profitability and growth potential. For instance, "Star" services with high demand and rapid growth, such as digital consulting in an IT firm, can receive more investment to capitalize on their popularity and maintain market leadership. "Cash Cow" services, which generate steady revenue but with slower growth, like financial auditing in an accounting firm, can be optimized for efficiency and profitability. "Question Marks," emerging services with uncertain potential, can be evaluated to decide whether they warrant further investment for development.

Here's an example of how you might use the BCG matrix to scale an Investmet business in a very haig level: Stars:A new investment strategy in emerging technologies that is quickly gaining popularity. Cash Cows: A traditional investment strategy that has been stable and dominant in the market for a long time. Question Marks:A new investment line in an emerging market with great potential but has not yet achieved significant market share. Dogs:An investment strategy that has lost relevance in the market and shows no signs of recovery.

Typically, companies have access to the required metrics, such as market growth, relative market share, and competitive measures, making it relatively straightforward to implement and prepare.

In my experience, to manage the portfolio effectively, allocate resources based on quadrant characteristics. Innovation >> Invest in Stars for growth Market Leaders >> Maintain Cash Cows for profitability Competitive Pressures >> decide on the strategic direction for Question Marks Non-Profitable >> consider divesting or restructuring Dogs. Regularly reassess the matrix to adapt to market changes and competitive changes.

One benefit of using BCG matrix is to plan your new product launching into the market. Using this framework, you can decide whether your product is Stars or Cash cows or Question marks or Dogs. Depending on this method you can decide whether to go ahead with it or change your product to something with high market share and high growth rate, which generates high revenues and require high investments.

BCG matrix classifies businesses as high and low, but generally businesses can be medium also. Thus, the true nature of business may not be reflected and the business could be overrated or underrated.

In my experience, you should only use the Boston Consulting Group (BCG) matrix to manage your product portfolio only if you use the same matrice for all other parts of the business. The biggest setback of the BCG matrix is that it has an inherited fundamental mathematical/logical mistake. It is a matrix when it should be a matrix product. If it was a matrix product, each part of the business process would be an individual matrix and the whole business would be a matrix product. This would enable optimization on the system level and not on a single KPI as it is done today. Optimisation on a single KPI is root of all evil in every company and also in local and global economy. It is not sustainable!

BCG had no thing to represent regarding the below points, it just give a bird eye on the products VS Market share that may have no accurate real projection and can be changed rapidly. 👉No clear inputs on the Product life cycle. 👉Product Quality levels. 👉Superior Customer experience that can win the game at the end. 👉What about the Competition itself. 👉Sustainability aspect. 👉The Value behind it.

The BCG Matrix has limitations, such as oversimplifying complex markets and assuming high market share guarantees profitability. It doesn't consider external factors like market trends or competitive dynamics. The static nature of the matrix may not capture the dynamic nature of industries. Additionally, the focus on relative market share and growth rate might not encompass other critical factors influencing a product's success, potentially leading to strategic oversights.

Leveraging the BCG matrix in practice involves strategic portfolio management. One of my favourite examples is of Apple's product lineup. High-growth, high-market-share products like the iPhone fall into the "Stars" quadrant, while mature products, like the MacBook, are "Cash Cows." Emerging products, such as the Apple Watch/Earpods/TV, represent "Question Marks," demanding strategic investment. Lastly, the iPod, in decline, fits the "Dogs" category. By applying the BCG matrix, businesses can optimize resource allocation effectively.

It must be complemented with many analysis and accurate data, it’s not a constant figure that we follow, it can be changed very rapidly. -So Define your product Right. -THE VALUE behind and the gap that will be closed. -The segment that we chose. -The accurate real data about the market and competition. -How we will play to achieve. - Risk and opportunities Analysis.

BCG Matrix offers a simple visual tool to classify products according to their market growth and relative market size. Going through a process of categorizing products into Question Marks, Stars, Cash Cows, and Dogs helps an entity (a) appreciate whether it has a balanced product portfolio and (b) reflect on whether it is pursuing an appropriate strategic response for each product. I love how this simple idea may be helpful to professional service firms as well.